Certainly Uncertain

December 13, 2010

Money-Guy 12-13-2010

As is usually the case, the holiday season has caused our bi-weekly schedule to be slightly off. You could probably even say that the frequency at which we get these podcasts published during the holidays is somewhat “uncertain” (you will see how clever this statement is as you read on… : -)

In today’s show, we touch on a subject that EVERYONE in this country can relate to right now… uncertainty!

  • Will tax rates go up?
  • Will the tax cuts expire?
  • What will the death tax be?
  • How much is a taxable estate?
  • What is going to happen to capital gains?
  • How do I invest?
  • Should I stay in equities and “ride the roller coaster”?
  • Should I move to cash for the safety but earn nothing?
  • Is there really going to be a bond bubble?

These are just a few questions that are circulating up in Washington, in the media, and even at the water cooler. Oddly enough, right now the answer to all of them is the same: who knows? Well, when you have these “who knows” type of questions, how do you plan for the future? To start off the show, we share a listener email that expresses this exact concern and we give you the Preston & Cleveland rationale of how (from an investment stand point) you should think about this current market environment.

We go on in the show to share a little case study experiment we conducted. Because I have a background in accounting and I am a CPA by training, I still do a handful of tax returns each year (about 52 to be exact). I thought it would be very interesting to break out those 52 returns by Adjusted Gross Income and then take a look at each group’s effective tax rate (in an attempt to see if there is any weight to the “rich people don’t pay taxes” theory). I then determined which of these clients were business owners and even took that a step farther to see how many individuals they employ (to see if small business owners really are employing that many people). Here are my results:

  • Of the 52 returns, 19 had AGIs under $100k, 25 between $100k and $250k, and 8 clients  over $250k.
  • The average AGI of clients below $100k was $50,700 and their effective tax rate was 9.6%
  • The average AGI of clients between $100k and $250k was $150,600 and their effective tax rate was 18.4%
  • The average AGI of clients above $250k was $615,000 and their effective tax rate was 26.2%

What this says to me is that high income earners pay more in taxes (in percentage terms) than lower income earners. I found the following statistics even more compelling:

  • Of the 19 individuals below $100k AGI, 2 of them were business owners and they collectively employed 16 people.
  • Of the 25 individuals between $100k and $250k AGI, 3 of them were business owners and collectively employed 8 people.
  • Of the 8 individuals over $250k, 5 of them were business owners and employed 112 people.

To me (at least for my small sample of the American population) this says that there is some truth to the fact that business owners making over $250k really do employ a lot of people. As you listen, we will go even deeper into these numbers and explain some other conclusions we were able to draw from this very simple analysis.

Most Recent Episodes

Top 4 Financial Mistakes We Saw This Year! (2022)

We saw some wild financial mistakes this year during the bear market. From making extreme changes to portfolio allocation, chasing the hot dot, and using too much leverage, we’ll talk about some of the biggest financial mistakes we saw in 2022 in this episode.   In...

How Millionaires Build Wealth! (With Dave Ramsey)

Join us for a very special episode as we welcome personal finance radio host and influencer Dave Ramsey to The Money Guy Show! There’s so much misinformation out there about building wealth. We had the pleasure of having a great conversation about how millionaires...

Do These 4 Things with Your Finances BEFORE 2023!

There are unique financial opportunities available at the end of the year - especially this year with the market down. In this episode, we’ll talk about what you need to do with your money BEFORE 2023! In this episode, you'll learn: What you need to do with your money...

How to Win When the Financial World is Burning!

Lately it’s felt like the financial world is in chaos, with rising interest rates, a falling stock market, and high inflation. Let’s talk about how to focus on what you can control and how to minimize the time spent worrying about what you can’t control. In this...

Financial Advisors React to RIDICULOUS Money Advice on TikTok!

The most powerful time to get serious about building wealth is when you’re young. So, what is the younger generation learning? Financial Advice (good and bad) is being produced in massive rates across online platforms and TikTok is the new frontier. Is there good...

Loss Harvesting: Why Wealthy People Love It (And You Should Too!)

Tax-loss harvesting: what is it and should you be doing it? In this episode, we’ll cover everything you need to know about tax-loss harvesting, including whether it makes sense for you, how much it could save you in taxes, and how to eliminate the downside of loss...

The Market is Crashing! (Where Should You Put Your Money?)

The stock market has not had a great year so far. You might be asking yourself, “Since the market is crashing, where should I put my money now?” In this episode, we’ll discuss how to invest when the market is dropping and how to make the most of your money. In this...

Will Rising Interest Rates Tank the Economy?!

The Federal Reserve is raising interest rates to combat inflation, and many are concerned about how it will affect the economy. In this episode, we’ll discuss what rising interest rates means for your wallet and how to make the best of it. In this episode, you'll...

How to Be Wealthy By Age! (Can You Catch Up?)

How much does it take for you to meet your retirement goals by age, and what are some common traps your peers fall into? Learn more about how to be wealthy, mistakes to avoid, and exactly what a little extra saving can do for your retirement income. In this episode,...

Can Money Buy Happiness? (Here’s the Truth)

Money and happiness aren’t directly correlated, but they are intertwined. Some believe that once they have a large, pie-in-the-sky amount of money, they will finally be happy. Others are working towards a more specific retirement number they hope will bring happiness....